When mortgage rates drop to near historic lows like recently, many homeowners start thinking about either refinancing their current homes or buying a new one.  

According to Freddie Mac and the National Association of Homebuilders, mortgage rates are expected to hover around 3 percent this year. The National Association of Realtors projects the rate will reach 3.2 percent in 2021, and Wells Fargo believes rates will be around 2.89 percent. All these numbers are attractive for both new home buyers and those looking to refinance. 

There are benefits and pitfalls to both that a knowledgeable and professional agent can communicate to put you in the best position possible.  

Despite it being a seller’s market where home prices in many regions are skyrocketing, you could still manage to land the home of their dreams without breaking the bank.  

However, if you aren’t up for getting into possible bidding wars, are still content in your current home, or need to squeeze some money out of your monthly budgets, refinancing can provide some benefits. 

To help you clients determine whether they should buy now or refinance instead, here are some essential considerations to share. 

REASONS TO REFINANCE 

Depending on what kind of loan you are eligible for, refinancing may provide one or more benefits, including a lower interest rate (APR), lower monthly payment, shorter payoff term, or the ability to cash out home equity. Here is a closer look at good reasons to consider refinancing. 


Lower, fixed interest rate:
Rates are near historic lows right now, so refinancing and locking in a low rate for the future may be an excellent move for some. The question that is often asked is what percentage of ainterest rate drop is worth refinancing for? While that is important, it’s also essential to look at your mortgage value and how much money they may be able to save in the long run. For example, a 1.5% reduction in the rate may be worth refinancing a million-dollar mortgage, but not a mortgage that is $150,000 


Lower monthly payments: 
If your income has recently decreased and they need some cash immediately to help with bills or start an emergency fund, refinancing can help make that happen. That’s because the new interest rate they’ll get is likely less than their original loan, so their monthly house payment will go down. That frees up a little money to be used for other pressing purposes. They can also stretch out the loan term to decrease the payment. 


Borrowing additional funds:
For those looking to get more money immediatelythis may be a good solution. One refinancing option is to tap-in to your home equity. This will allow you to borrow funds that can be used for any purchase. Home equity can also be one of the best methods to borrow money since interest rates are often lower than any other type of debt and it also qualifies as a tax deduction. 

 

REASONS TO PURCHASE A HOME 

Buying a home in a seller’s market might sound expensive. And, it can be. But if you are in stellar financial shape and motivated to find a home that’s a step above your current house, buying may be worth it. Here are some reasons some should consider buying in the current seller’s market. 


Lower payments: 
The interest rates are still really low for homebuyers. From that perspective, it’s a great time to buy. Lower rates mean lower monthly payments for your clients. That also means that you can afford more of a house in some cases than they would if the rates (and payments) are higher.  


Buy so you can sell:
If you are looking to buy, then chances are you’ll also be selling. Maybe you’ve been waiting for an excellent opportunity to sell your own home when it can command a high asking price. The current seller’s market is the time.  

The ideal outcome would be to make a nice profit off the sale and use a nice chunk of that as a healthy down payment or part of a cash offer on a new home. Having the resources to put in a cash offer will make you a more appealing buyer during those bidding wars.  


More straightforward process
: In a typical housing market, the home buying process can get complicated and drag on for weeks or even months with open houses, second showings, offers, counteroffers, counteroffers to counter-offers, pending sales, etc. And that’s on each home buyers are interested in. 

But in a seller’s market, things move much faster. It’s not usual for sellers to receive a dozen offers within days (or hours) of a property being listed. The good news for those looking to buy is that they will know very quickly if they’ve scored a home they put an offer in on or whether they should move on to the next one. No waiting around for sellers to respond, making counteroffers, and riding the rest of the homebuying roller coaster. 

The decision of whether to buy a home or refinance in a seller’s market is different for everyone. There is no clear right or wrong decision for you to make. But since the rates are so low, buying or refinancing are options you may want to at least consider, especially for those with reasonably good credit and stable employment. 

 

The pros and cons of refinancing your home (2020, October 23). Retrieved June 2, 2021, from https://www.cnbc.com/select/pros-and-cons-of-refinancing-home/

Top 5 reasons to refinance and the pros and cons of each. (n.d.). Retrieved June 2, 2021, from https://bettermoneyhabits.bankofamerica.com/en/home-ownership/top-five-reasons-to-refinance

Buying in a Seller’s Market: 9 Ways to Win (2021, Feb. 2). Retrieved June 2, 2021, from https://www.redfin.com/blog/buying-in-a-sellers-market/

Should You Buy A House in a Seller’s Market? (2020, November 5). Retrieved June 2, 2021, from https://www.moneyunder30.com/should-you-buy-a-house-in-a-sellers-market